Analysts' latest Nifty target near 20,000. What can be the driving factors

11 Aug , 2022 By : Kanchan Joshi

Despite a multitude of headwinds like adverse macros, rising rates, tightening liquidity and volatile commodity costs, the Nifty has outperformed global markets in year-to-date or YTD terms for CY22. The Nifty-50, after three consecutive months of decline, bounced back smartly in July 2022 with nearly 9% month-on-month (MoM) gain, the highest since December 2020.

The index, which currently trades above 17,600, is expected to reach near 20,000, as per analysts. Based on the consensus target prices for the Nifty 50 companies, there is a potential upside of 13% for Nifty 50 index to 19,717, said Motilal Oswal in a report that pore over the Nifty consensus data sourced from Bloomberg to take note of which stocks are most favored on the street, and the possible target of the Nifty at the market, sector and stock levels.

Private banks, oil & gas, NBFCs, technology, PSU banks, telecom and consumer are likely to contribute the most to the Nifty index’s upside. However, analysts note that oil & gas, autos, consumer, PSU banks and private Banks have outperformed the markets YTD’CY22 with 18%, 18%, 14%, 11% and 8% returns, respectively. The top-10 stocks will likely contribute 72% to the Nifty’s target upside.

“As we look ahead, we note that commodity costs have corrected over the last few weeks, offering some respite to the adverse macros. Further, global bond yields have moderated from their recent highs and earnings estimates for the Nifty stocks have not seen any worthwhile cuts," the note stated.

As the benefit of the recent moderation in commodity costs start accruing in 2HFY23E, Motilal Oswal expects other sectors to contribute too. Markets have bounced back smartly in July 2022 with Nifty-50 rising 9% MoM and almost wiping out the entire YTD’CY22 decline.

Nifty is now flat for YTD’CY22 and strongly outperforming the global markets despite the sharp foreign institutional investors (FIIs) selling witnessed during October 2021 to June 2022. FIIs recorded inflows of $0.8 billion in July 2022 after nine consecutive months of outflows worth $33.3 billion and year-to-date (2022) outflows stood at $25.9 billion.

As the first earnings season of FY23 culminates soon, analysts examine the marquee benchmark from a consensus perspective and gauge the popularity of the same.